China fears hit again to push FTSE back down - London Report

DESPITE rallying from China-related fears on Tuesday, the UK’s top share index sank yesterday, ending up not far from its lowest closing levels since the end of 2012.

Data showing an unexpected pick-up in UK retail sales and an increase in mortgage approvals offered encouraging signals on the domestic economy but failed to stem selling.

The FTSE 100 index closed down 1.7 per cent, to 5,979.20 points, broadly in line with falls in European equities.

The index posted its biggest one-day rise since 2011 on Tuesday after China cut interest rates to calm markets. But investors quickly resumed their focus on the deteriorating outlook for China’s economy and its impact on others.

London-listed miners Fresnillo and Randgold fell between 4.6 and seven per cent after gold and copper prices fell. Glencore dropped 3.7 per cent.

Some fund managers said they were looking at buying opportunities. More short-term investors said they were selling out of positions taken earlier this week.

“On a short-term basis, I am willing to increase my risk and buy. I believe the market is offering opportunities,” AllianceBernstein portfolio manager Michele Patri said.

“But medium-term the situation looks complex.”

He added: “When you see how stocks exposed to global growth are performing, you can really see how investors do not have faith in the outlook.”

Shares in advertising group WPP fell two per cent after the group said trading in China had been “weak” in the second quarter compared with the first. The group reiterated it was on track to hit its full-year sales target, however.

Support services firm Carillion fell 3.7 per cent, despite saying it was on track for an increase in revenue this year after it posted a strong first half, boosted by contracts won in 2014 and orders secured in 2015.

Among smaller companies, HSS Hire plummeted 39 per cent after the tool and equipment hire company said it expected earnings below market expectations and as Numis and JP Morgan cut their price target for the stock.

“A second profit warning within six months of the IPO has reduced our confidence that HSS can deliver growth rates significantly ahead of the market,” Numis said in a note.

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